Kartman Corporation makes a product with the following standard costs: In June the company's budgeted production was 3,400 units but the actual production was 3,500 units. The company used 22,150 pounds of the direct material and 2,290 direct labor-hours to produce this output. During the month, the company purchased 25,400 pounds of the direct material at a cost of $170,180. The actual direct labor cost was $57,021 and the actual variable overhead cost was $8,931.The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.The labor efficiency variance for June is:

A) $4,560 Favorable
B) $4,560 Unfavorable
C) $4,731 Unfavorable
D) $4,731 Favorable

Question

Kartman Corporation makes a product with the following standard costs:

In June the company's budgeted production was 3,400 units but the actual production was 3,500 units. The company used 22,150 pounds of the direct material and 2,290 direct labor-hours to produce this output. During the month, the company purchased 25,400 pounds of the direct material at a cost of $170,180. The actual direct labor cost was $57,021 and the actual variable overhead cost was $8,931.The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.The labor efficiency variance for June is:

A) $4,560 Favorable
B) $4,560 Unfavorable
C) $4,731 Unfavorable
D) $4,731 Favorable

Trinity Godina · Accepted Answer

Final Answer : B, Explanation :  To calculate the labor efficiency variance, we need to compare the actual direct labor hours used to produce the units with the standard direct labor hours allowed for the production.Standard direct labor hours allowed = Standard labor hours per unit x Actual output= 1.6 DLH/unit x 3,500 units= 5,600 DLHActual direct labor hours used = 2,290 DLHLabor efficiency variance = Standard labor hours allowed - Actual direct labor hours used x Standard labor rate per hour= (5,600 - 2,290) x $14 = $46,060 unfavorableTherefore, the answer is B, $4,560 Unfavorable.

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